Software piracy is the unauthorized copying, use and distribution of software (e.g., an application program or an operating system). According to Business Software Alliance (BSA):                Software is one of the most valuable technologies of the Information Age, running everything from PCs to the Internet. Unfortunately, because software is so valuable, and because computers make it easy to create an exact copy of a program in seconds, software piracy is widespread. From individual computer users to professionals who deal wholesale in stolen software, piracy exists in homes, schools, businesses and government. Software pirates not only steal from the companies that make the software, but, with less money for research and development of new software, all users are hurt. That's why all software piracy—even one copy you make for a friend—is illegal.        As the number of PCs and Internet use grow, the incidence of software piracy is growing, too. The Business Software Alliance believes new technologies should enhance ways to access and distribute copyrighted works legally, not illegally.        
A recent report (the Global Software Piracy Study: www.bsa.org/globalstudy), published by the BSA and International Data Corp (IDC), indicates that 2003 annual worldwide losses to the industry are over $29 billion, which is more than double the previous year's losses. The study also indicates that about 36 percent of software installations worldwide are pirated copies.
John Gantz, Chief Research Officer at IDC, said, “Unfortunately, we found that high market growth regions also tend to be high piracy regions, such as China, India and Russia. If the piracy rate in emerging markets—where people are rapidly integrating computers into their lives and businesses—does not drop, the worldwide piracy rate will continue to increase.” The BSA/IDC report stated that there were a number of provincial differences that played a role in piracy. Some of those included local-market size, the availability of pirated software, the strength of copyright laws, and the cultural differences regarding intellectual property rights.
Copy protection is one approach used to combat software piracy. Copy protection is a technical protection measure designed to prevent duplication of copyrighted works. However, from a technical standpoint, it would seem impossible to completely prevent all users from making copies of such media as CDs.
Another common approach is to require a user to activate the software by providing information that only a user should know, that the user acquires from the packaging contents, and/or from an activation center. For example, a serial number, a number that comes with the software, may be required to install a software program. A phone activation code may be required. The user calls to register the product and to receive phone activation. An on-line activation may be required. The user is required to connect to the Internet and type in a serial number so the software can “call home” and notify the manufacturer as to who has installed the software and where, and to prevent other users from installing the software if they attempt to use the same serial number.
Still another approach is the use of a “dongle,” which is a piece of dedicated hardware that is plugged into the computer in order to execute dongle-activated software. When the dongle is present, the software will run properly; when it is not, the program will run in a restricted mode or refuse to start.
Since the dedicated hardware adds extra cost for the software publisher, dongles are uncommon for low-end software packages (e.g., video games) and are found mostly in high-end software packages costing several thousand dollars (e.g., CAD/CAM).
Dongles tie up a port on the host machine. This has been ameliorated to some extent by the adoption of USB, but it is still a serious drawback. To get around this, most practical dongles include a replacement port, so as to become an inline device.
In fields where dongle-protected software is common, users often need more than one such application installed on a given computer. Manufacturers claim that multiple dongles can be successfully stacked or daisy-chained, but operational problems with stacked dongles are common. The number of dongles can also become physically problematic.
There is the obvious problem of losing the dongle, rendering the protected software useless until a replacement can be obtained. This is particularly likely if one needs to swap dongles for different applications.